Showing events on this day in years past that shaped history... just, not our history.

Monday, September 24, 2012

September 24, 1869 - Grant Holds onto Federal Gold

The great expense of the Civil War and Reconstruction had prompted the federal government to pay expenses with bonds backed by credit alone. With such patriotic times, the public had no worry trusting the government to repay the bonds with gold upon maturity, solidifying not only the government's books but also its good name.

Speculators, however, saw a chance to make off with millions of dollars in the market. James Fisk and Jay Gould led a group of investors in cornering the gold market, buying up every ounce they could collect. The price of gold shot up, topping a 30% increase in less than a year. Meanwhile, Fisk and Gould came into contact with Abel Corbin, President Ulysses Grant's brother-in-law, who took them into Grant's social circle. There, they argued against sale of federal gold (saving it for rainy days and continuing the controversial use of greenbacks), planting the seeds of thought into Grant's head. Corbin, meanwhile, brought in Daniel Butterfield, a former general, as a suggested assistant to the Treasury. Grant agreed to his appointment, and Butterfield promised to give advance word of the inevitable sale.

According to biographers, Grant became wary of the issue of gold sometime around September 20. Initially, he was outraged by men attempting to profit out of the shadows, but Corbin (who himself was deeply invested in gold) convinced the President that it would be for good. The businessmen could use the money to invest and diversify, which would help the general economy by building more infrastructure and capital. The wealth would "trickle down", and it would help the average American overall by providing jobs and wider markets. Grant begrudgingly and bewilderedly agreed.

Speculators made millions by selling just before the announcement of the huge federal sale. By the time the gold was sold, the government earned a significantly smaller amount than they would have and was forced to sell more to make the dollar-benchmark set. Word gradually went out about the sale and enraged the populace. Already fed up with the paternal system of back-patting among engrained Republicans as well as the "moiety" through which bureaucrats became wealthy, such as Tax Commission Officer Chester A. Arthur of New York making a salary of $10,000 while receiving upwards of $50,000 from kickbacks and trimming underling's salaries for granting choice assignments.

Scandal rocked the Republican Party, and an investigation led by Congressman James A. Garfield of Ohio indicted the president. Grant resigned, and the new President Schuyler Colfax prompted Congress to dismantle the political corruption known as the "Era of Good Stealings."

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In reality, when Grant learned of the gold speculation, he ordered $4 million worth of gold sold out of the US Treasury. The price of gold plummeted in minutes on what became known as Black Friday, Sept 24, 1869. Investors in the plot, such as Corbin, lost whole fortuntes. Fisk and Gould, however, escaped unscathed, as would many in what Twain nicknamed "The Gilded Age."